Posted on

Planned R59 billion bailout to SOEs will worsen debt levels and impact ratings

Reports of a proposed bailout for parastatals by cabinet, especially the South African National Roads Agency (SANRAL), will worsen the country’s precarious debt levels and negatively impact South Africa’s national sovereign ratings.

Cabinet’s argument that a SANRAL default will affect sovereign ratings is flawed because a government guarantee of R59 billion will increase the state’s debt liabilities to 60% of GDP, which is sure to induce a sovereign credit downgrade.

It is somewhat surprising that the report seems to ignore the other elephant in the room – the contingent liability in the form of Eskom debt and government guarantees that, according to the Eskom corporate plan, will increase from R 235 billion To R 600 billion over the next three years.

I will write to the Chair of the Standing Committee on Finance (SCOF), Yunus Carrim, to request that the Fiscal Liability Committee and the Asset and Liability Management Unit of the National Treasury be called urgently to  come and address the SCOF on the full extent of sovereign liabilities, contingent liabilities and current applications for government guarantees and cash bailouts.

Posted on

DA welcomes decision to summons Markus Jooste to given evidence in Parliament

We welcome the adoption of a resolution [see here] resolving to summons Marks Jooste to give evidence on the scandal surrounding “accounting irregularities” at Steinhoff International Holdings N.V.

We may now finally get to hear evidence about the “big mistakes” Markus Jooste made which resulted in what may be one of the biggest corporate scandals in the history of South Africa.

We expect the hearing, which will include the Standing Committee on Finance, Standing Committee on Public Accounts, Portfolio Committee on Trade and Industry and Portfolio Committee on Public Administration, to be scheduled to take place on or about Wednesday 01 August 2018 in Parliament.

Posted on

Parliament must ‘hold the line’ on Steinhoff

The appearance of Steinhoff executives before the Standing Committee on Finance (SCOF) on Wednesday, 28 March 2018, is an opportunity for Parliament to seek clarity on the proposed financial rewards for Steinhoff board members Heather Sonn, Johan van Zyl and Steve Booysen.
It is simply reckless that the same individuals who were running the company when financial reports were apparently manipulated are now being “rewarded” for fixing the mess they created. The Steinhoff board is under a moral obligation to minimise financial losses to investors, not least of which are the pensioners and members of the Government Employees Pension Fund (GEPF).
The DA will write to the PIC, as a Steinhoff shareholder, to request that they not only hold the Steinhoff board and executives to account but to refuse the obscene financial rewards that have apparently been proposed.
Steinhoff executives have failed to show real remorse on the financial damage that the accounting scandal has inflicted on the pensions of ordinary government employees. No one personifies this defiance than former Steinhoff CEO, Markus Jooste, who will most likely ignore the invitation to appear before the SCOF and other parliamentary committees.
Should Markus Jooste fail to appear before the SCOF on the 28th of March 2018, the DA will request that the SCOF summon him to appear before it.
There are literally millions of South Africans who have been affected by the collapse of Steinhoff and all the relevant persons must be held to account. There is a definite role for the SCOF to play in the process of ensuring that the regulatory regime has not failed Steinhoff investors.

Posted on

FSB and others fail to respond to finance committee on the scandal surrounding Steinhoff

A copy of the correspondence between DA Shadow Minister of Finance, David Maynier MP, and the Chairperson of the Standing Committee on Finance, Yunus Carrim, is enclosed [here].

To his credit, the Chairperson of the Standing Committee on Finance, Yunus Carrim, wrote to a number of institutions on 14 December 2017 requesting them to provide information within seven days, or as soon as possible thereafter, on the scandal surrounding “accounting irregularities” at Steinhoff International Holdings N.V.

These institutions included the Financial Services Board, Government Employees Pension Fund, Independent Regulatory Board of Auditors, Johannesburg Stock Exchange, National Treasury, Public Investment Corporation and the South African Reserve Bank.

However, finance committee members have only received three responses, including responses from:

• Bernard Agulhas, the Chief Executive Officer of the Independent Regulatory Board of Auditors, on 14 December 2017;
• Lesetja Kganyago, Governor of the South African Reserve Bank, on 18 December 2017; and
• Linda Mateza, Acting Principle Executive Officer, Government Employees Pension Fund, on 19 December 2017.

This despite the fact that the scandal surrounding “accounting irregularities” at Steinhoff International Holdings N.V. is a matter of enormous public importance that has wiped out the savings of thousands of ordinary people in South Africa.

It is completely unacceptable for the Financial Services Board, Johannesburg Stock Exchange, National Treasury and Public Investment Corporation to be asleep at the wheel and fail to respond to the Standing Committee on Finance.

That is why I have written to the Chairperson of the Standing Committee on Finance, Yunus Carrim, requesting him to light a fire under the defaulters and demand that they immediately respond to the request for information on the scandal surrounding “accounting irregularities” at Steinhoff International Holdings N.V.

Posted on

Resignation of Michael Sachs plunges the budget process into chaos in the middle of a fiscal crisis

The Minister of Planning, Monitoring and Evaluation, Jeff Radebe, tried to reassure us that there was “nothing to fear” from the new “budget prioritisation framework” during his briefing following the medium-term budget policy statement on 26 October 2017 in Parliament.
However, the shock resignation of veteran budget office head, Michael Sachs, which is a huge blow to National Treasury, confirms our fears that decision-making on budget priorities, and the budget itself, have now been centralised under President Jacob Zuma.
We now have:
• a “Presidential Fiscal Committee” making decisions about the budget at the expense of the Minister’s Committee on the Budget;
• a “Mandate Paper” setting out budget priorities, in terms of a new budget prioritisation framework, compiled by the Department of Planning, Monitoring and Evaluation, at the expense of National Treasury; and
• that is not to mention rogue elements, such a Morris Masutha, who are reportedly peddling a R40 billion budget-busting plan for higher education, with the support of President Jacob Zuma.
What this means is that in the middle of a “fiscal crisis”, which Michael Sachs himself described as the most challenging since the global financial crisis, decision-making on the budget has been plunged into chaos.
And it seems that National Treasury are slowly being “defanged” and reduced to “bookkeepers”, with declining influence over budget priorities, and the budget itself, under President Jacob Zuma.
That is why I will write to the Chairperson of the Standing Committee on Finance, Yunus Carrim, requesting him to schedule an urgent hearing on this matter before the end of recess in Parliament.
We can only hope that there is no snowball effect and that other senior officials at the apex of the system hold steady do not resign from National Treasury.
 
 

Posted on

National Treasury hiding the true cost of SAAs renewed loans

The National Treasury appears to be attempting to hide the true cost of South African Airways’ (SAA) latest bailout with its response to the DA’s request for details of interest rates charged on renewed loans to SAA. A request which was supported by the Standing Committee on Finance.
Standard Bank, ABSA, Nedbank and other domestic lenders to SAA were due to be paid R5.0 billion on the 30th of September 2019. These lenders were convinced to roll over their loans provided that certain conditions were met by SAA. One of which was that Ms Dudu Myeni be removed from the SAA board, a condition which was reluctantly complied with on the 3rd of November 2017.
It is suspected that a further condition made by the domestic lenders was that the interest rates charged on the renewed loans would be increased. Consequently the DA requested that the Minister of Finance and National Treasury provide the Standing Committee on Finance with details of the interest rates charged by the domestic lenders.
National Treasury initially responded, on the 1st of November 2017, by saying that the interest rates were confidential. This response was clearly nonsensical as the Standing Committee on Finance had previously been provided with a full list of all lenders to SAA together with the amounts, maturity dates and interest rates.
The Standing Committee on Finance supported the DA’s request for details of the interest rates for SAA’s renewed loans and instructed the National Treasury to provide the details.
Today, Monday the 6th of November 2017, we received the following reply from National Treasury:
‘The interest rates charged by lenders on loans to SAA that were rolled over at the end of September 2017 have changed. The exact figures need to be requested from SAA.’
This is an unacceptable response from National Treasury, that attempts to frustrate its accountability to parliament. SAA falls under the oversight of National Treasury and we believe is obligated to provide the information required by the Standing Committee on Finance.

Posted on

Myeni still SAA Board Chairperson until 3 November

The DA notes with concern the Minister of Finance, Malusi Gigaba’s, statement which effectively means that Dudu Myeni shall remain as Chairperson of the South African Airways (SAA) board until his “special meeting with the new board” on the 3rd of November 2017, which also seems to have replaced the scheduled and vital AGM.
The 3rd of November is the date that the Minister told Parliament the SAA 2017 AGM would take place, not just a “special meeting” with the board.
This effectively means that the removal of Dudu Myeni and other changes to the SAA board will only be effective from the 3rd of November 2017 and that Myeni remains as the chair of the SAA board for another 14 days.
At Minister Gigaba’s post MTBPS briefing to the Standing Committee on Finance on Thursday the 26th of October 2017, I will ask for clarity on the following issues:
• Did the lenders to SAA make the removal of Dudu Myeni from the SAA board a condition before extending the repayment of their R5,0 billion loans to SAA;
• What were the other conditions imposed by the domestic lenders on their loans to SAA;
• Does Dudu Myeni remain on the SAA board as its chair until the 3rd of November 2017;
• If Dudu Myeni has been removed from the SAA board with immediate effect, who has been appointed to act as chair of the SAA board;
• Why the meeting of the board to be held on the 3rd of November 2017 is a special meeting and not the 2017 AGM;
• Why has the annual report still not been tabled in Parliament; and
• Who will present the 2017 annual report to the SAA AGM?
Minister Gigaba seems to think that by finally removing the toxic Myeni, that SAA will be saved. This is not the case.
The airline is bankrupt and requires R10 billion to continue to limp along. It is time to face up to the fact that SAA can only be saved if it is put into business rescue, stabilised and sold.

Posted on

DA to request Parliamentary legal opinion on Gigaba’s SAA bailout

Finance Minister, Malusi Gigaba’s, use of section 16 of the Public Finance Management Act (PFMA) to bail out South African Airways (SAA) again, to the tune of R3 billion, could have been avoided and may have been unlawful.
The DA have therefore written to the Chair of the Standing Committee on Finance, Yunus Carrim, to request that a legal opinion on this be obtained from the Parliamentary legal advisors.
A number of instances clearly showed that SAA was in deep trouble yet again. These include:
• As early as 27 June, a 12-month cash flow analysis clearly showed that SAA would not have enough cash to pay suppliers in full in July, August and September;
• In late June, Citibank indicated that they would not agree to extend the payment of the R1,8 billion owed to it beyond the end of last month; and
• Media reports on 23 August also indicated that Gigaba and the Cabinet were fully aware then of the “unwillingness” of some lenders to “further extend funding to the airline”.
The DA believes that not only were these funding requirements foreseeable, but had in fact been foreseen at least three months beforehand and therefore, there was more than enough time available for a Parliamentary appropriation of funds.
Parliament’s legal advisors need to get to the bottom of Gigaba’s use of the PFMA to bail out SAA by raiding the public purse and we trust that the legal opinion will do just that.

Posted on

It’s time for SCOF to step up and scrutinise SARS’ handling of the SARS “rogue unit”

South African Revenue Service commissioner, Tom Moyane, has notified the Standing Committee on Finance of his “dissatisfaction” with KPMG International’s handling of the controversy surrounding the SARS “rogue unit”.
SARS’ investigative review culminated in KPMG South Africa producing a forensic audit report entitled “Report on Allegations of Irregularities and Misconduct”, dated 04 December 2015, parts of which were subsequently repudiated by KPMG International.
The commissioner seems to want the committee to scrutinise KPMG International’s handling of the controversy surrounding the SARS “rogue unit”, when the committee should, in fact, be scrutinising SARS’ handling of the controversy surrounding the SARS “rogue unit”.
I have, therefore, written to the Chairperson of the Standing Committee on Finance, Yunus Carrim, requesting him to schedule hearings to scrutinise SARS’ investigative review of the so-called SARS “rogue unit”.
To properly scrutinise SARS’ investigative review of the SARS “rogue unit”, it is imperative that the committee be granted access to a number of documents, prior to the hearing commencing, including:

  • a copy of the final report, entitled “Report on Allegations of Irregularities and Misconduct”, dated 04 December 2015, received by SARS;
  • a copy of the draft report, entitled “Report on Allegations of Irregularities and Misconduct”, dated 03 September 2015, received by SARS;
  • copies of any other drafts of the report, entitled “Report on Allegations of Irregularities and Misconduct”, dated before 03 September 2015, received by SARS;
  • a copy of the Service Level Agreement between SARS and KPMG South Africa;
  • copies of all communication between SARS and KPMG South Africa on the mandate extension to include conclusions, recommendations and legal opinions, referred to in KPMG International’s press statement dated 15 September 2017; and
  • copies of all communication between (a) SARS and KPMG South Africa and (b) SARS and KPMG International relating to KPMG South Africa’s investigative review of the SARS “rogue unit”.

It’s time for the Standing Committee on Finance to step up and fulfil its constitutional obligation to scrutinise the controversy surrounding the SARS “rogue unit”, which it has failed to do for years in Parliament.

Posted on

DA welcomes finance committee hearing on dodgy audits of Gupta entities conducted by KPMG

On 13 September 2017, I requested that the Chairperson of the Standing Committee on Finance, Yunus Carrim, schedule a hearing with the Independent Regulatory Board for Auditors, which is responsible for regulating registered auditors and registered audit firms, in South Africa.
The request was aimed at monitoring progress being made by the regulator on a number of investigations including, most importantly, the existing investigation being conducted into the audit of Linkway Trading (Pty) Ltd, a company allegedly involved in tax evasion, in relation to the Gupta family wedding at Sun City in 2013.
The findings of KPMG International’s investigation, which were subsequently made public on 15 September 2017, make the hearing even more pressing, given the fact that the investigation:

  • established that “management of many Gupta entities responded misleadingly and inadequately to audit teams enquires about the nature of related party relationships and the commercial substance of significant unusual transactions”; and
  • identified “a series of misrepresentations from the client over the period that KPMG South Africa provided tax advice.”

We are, therefore, pleased that it has now been confirmed that the  Chief Executive Officer of the Standing Committee on Finance, Yunus Carrim, will appear before the Standing Committee to brief us on progress with investigations into various audits, including the investigation into the audit of Linkway Trading (Pty) Ltd, on 03 October 2017 in Parliament.